
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC179]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
      PART VI--ITEMIZED DEDUCTIONS FOR INDIVIDUALS AND CORPORATIONS
 
Sec. 179. Election to expense certain depreciable business 
        assets
        

(a) Treatment as expenses

    A taxpayer may elect to treat the cost of any section 179 property 
as an expense which is not chargeable to capital account. Any cost so 
treated shall be allowed as a deduction for the taxable year in which 
the section 179 property is placed in service.

(b) Limitations

                        (1) Dollar limitation

        The aggregate cost which may be taken into account under 
    subsection (a) for any taxable year shall not exceed the following 
    applicable amount:

  If the taxable year                                     The applicable
    begins in:                                                amount is:
            1997................................                 18,000 
            1998................................                 18,500 
            1999................................                 19,000 
            2000................................                 20,000 
            2001 or 2002........................                 24,000 
            2003 or thereafter..................                 25,000.
                     (2) Reduction in limitation

        The limitation under paragraph (1) for any taxable year shall be 
    reduced (but not below zero) by the amount by which the cost of 
    section 179 property placed in service during such taxable year 
    exceeds $200,000.

        (3) Limitation based on income from trade or business

        (A) In general

            The amount allowed as a deduction under subsection (a) for 
        any taxable year (determined after the application of paragraphs 
        (1) and (2)) shall not exceed the aggregate amount of taxable 
        income of the taxpayer for such taxable year which is derived 
        from the active conduct by the taxpayer of any trade or business 
        during such taxable year.

        (B) Carryover of disallowed deduction

            The amount allowable as a deduction under subsection (a) for 
        any taxable year shall be increased by the lesser of--
                (i) the aggregate amount disallowed under subparagraph 
            (A) for all prior taxable years (to the extent not 
            previously allowed as a deduction by reason of this 
            subparagraph), or
                (ii) the excess (if any) of--
                    (I) the limitation of paragraphs (1) and (2) (or if 
                lesser, the aggregate amount of taxable income referred 
                to in subparagraph (A)), over
                    (II) the amount allowable as a deduction under 
                subsection (a) for such taxable year without regard to 
                this subparagraph.

        (C) Computation of taxable income

            For purposes of this paragraph, taxable income derived from 
        the conduct of a trade or business shall be computed without 
        regard to the deduction allowable under this section.

              (4) Married individuals filing separately

        In the case of a husband and wife filing separate returns for 
    the taxable year--
            (A) such individuals shall be treated as 1 taxpayer for 
        purposes of paragraphs (1) and (2), and
            (B) unless such individuals elect otherwise, 50 percent of 
        the cost which may be taken into account under subsection (a) 
        for such taxable year (before application of paragraph (3)) 
        shall be allocated to each such individual.

(c) Election

                           (1) In general

        An election under this section for any taxable year shall--
            (A) specify the items of section 179 property to which the 
        election applies and the portion of the cost of each of such 
        items which is to be taken into account under subsection (a), 
        and
            (B) be made on the taxpayer's return of the tax imposed by 
        this chapter for the taxable year.

    Such election shall be made in such manner as the Secretary may by 
    regulations prescribe.

                      (2) Election irrevocable

        Any election made under this section, and any specification 
    contained in any such election, may not be revoked except with the 
    consent of the Secretary.

(d) Definitions and special rules

                      (1) Section 179 property

        For purposes of this section, the term ``section 179 property'' 
    means any tangible property (to which section 168 applies) which is 
    section 1245 property (as defined in section 1245(a)(3)) and which 
    is acquired by purchase for use in the active conduct of a trade or 
    business. Such term shall not include any property described in 
    section 50(b) and shall not include air conditioning or heating 
    units.

                        (2) Purchase defined

        For purposes of paragraph (1), the term ``purchase'' means any 
    acquisition of property, but only if--
            (A) the property is not acquired from a person whose 
        relationship to the person acquiring it would result in the 
        disallowance of losses under section 267 or 707(b) (but, in 
        applying section 267(b) and (c) for purposes of this section, 
        paragraph (4) of section 267(c) shall be treated as providing 
        that the family of an individual shall include only his spouse, 
        ancestors, and lineal descendants),
            (B) the property is not acquired by one component member of 
        a controlled group from another component member of the same 
        controlled group, and
            (C) the basis of the property in the hands of the person 
        acquiring it is not determined--
                (i) in whole or in part by reference to the adjusted 
            basis of such property in the hands of the person from whom 
            acquired, or
                (ii) under section 1014(a) (relating to property 
            acquired from a decedent).

                              (3) Cost

        For purposes of this section, the cost of property does not 
    include so much of the basis of such property as is determined by 
    reference to the basis of other property held at any time by the 
    person acquiring such property.

           (4) Section not to apply to estates and trusts

        This section shall not apply to estates and trusts.

      (5) Section not to apply to certain noncorporate lessors

        This section shall not apply to any section 179 property which 
    is purchased by a person who is not a corporation and with respect 
    to which such person is the lessor unless--
            (A) the property subject to the lease has been manufactured 
        or produced by the lessor, or
            (B) the term of the lease (taking into account options to 
        renew) is less than 50 percent of the class life of the property 
        (as defined in section 168(i)(1)), and for the period consisting 
        of the first 12 months after the date on which the property is 
        transferred to the lessee the sum of the deductions with respect 
        to such property which are allowable to the lessor solely by 
        reason of section 162 (other than rents and reimbursed amounts 
        with respect to such property) exceeds 15 percent of the rental 
        income produced by such property.

              (6) Dollar limitation of controlled group

        For purposes of subsection (b) of this section--
            (A) all component members of a controlled group shall be 
        treated as one taxpayer, and
            (B) the Secretary shall apportion the dollar limitation 
        contained in subsection (b)(1) among the component members of 
        such controlled group in such manner as he shall by regulations 
        prescribe.

                    (7) Controlled group defined

        For purposes of paragraphs (2) and (6), the term ``controlled 
    group'' has the meaning assigned to it by section 1563(a), except 
    that, for such purposes, the phrase ``more than 50 percent'' shall 
    be substituted for the phrase ``at least 80 percent'' each place it 
    appears in section 1563(a)(1).

          (8) Treatment of partnerships and S corporations

        In the case of a partnership, the limitations of subsection (b) 
    shall apply with respect to the partnership and with respect to each 
    partner. A similar rule shall apply in the case of an S corporation 
    and its shareholders.

                  (9) Coordination with section 38

        No credit shall be allowed under section 38 with respect to any 
    amount for which a deduction is allowed under subsection (a).

                   (10) Recapture in certain cases

        The Secretary shall, by regulations, provide for recapturing the 
    benefit under any deduction allowable under subsection (a) with 
    respect to any property which is not used predominantly in a trade 
    or business at any time.

(Added Pub. L. 85-866, title II, Sec. 204(a), Sept. 2, 1958, 72 Stat. 
1679; amended Pub. L. 87-834, Sec. 13(c)(2), Oct. 16, 1962, 76 Stat. 
1034; Pub. L. 91-172, title IV, Sec. 401(f), Dec. 30, 1969, 83 Stat. 
603; Pub. L. 94-455, title II, Sec. 213(a), title XIX, 
Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1547, 1834; Pub. L. 97-34, 
title II, Sec. 202(a), Aug. 13, 1981, 95 Stat. 219; Pub. L. 97-354, 
Sec. 3(f), Oct. 19, 1982, 96 Stat. 1689; Pub. L. 97-448, title I, 
Sec. 102(aa), Jan. 12, 1983, 96 Stat. 2369; Pub. L. 98-369, div. A, 
title I, Sec. 13, July 18, 1984, 98 Stat. 505; Pub. L. 99-514, title II, 
Secs. 201(d)(3), 202, Oct. 22, 1986, 100 Stat. 2139, 2142; Pub. L. 100-
647, title I, Sec. 1002(a)(19), (b)(1), Nov. 10, 1988, 102 Stat. 3356, 
3357; Pub. L. 101-508, title XI, Sec. 11813(b)(11), Nov. 5, 1990, 104 
Stat. 1388-554; Pub. L. 103-66, title XIII, Sec. 13116(a), Aug. 10, 
1993, 107 Stat. 432; Pub. L. 104-188, title I, Secs. 1111(a), 
1702(h)(10), (19), Aug. 20, 1996, 110 Stat. 1758, 1874.)


                               Amendments

    1996--Subsec. (b)(1). Pub. L. 104-188, Sec. 1111(a), reenacted 
heading without change and amended text generally. Prior to amendment, 
text read as follows: ``The aggregate cost which may be taken into 
account under subsection (a) for any taxable year shall not exceed 
$17,500.''
    Subsec. (d)(1). Pub. L. 104-188, Sec. 1702(h)(10), struck out ``in'' 
before ``a trade or business''.
    Pub. L. 104-188, Sec. 1702(h)(19), inserted at end ``Such term shall 
not include any property described in section 50(b) and shall not 
include air conditioning or heating units.''
    1993--Subsec. (b)(1). Pub. L. 103-66 substituted ``$17,500'' for 
``$10,000''.
    1990--Subsec. (d)(1). Pub. L. 101-508, Sec. 11813(b)(11)(A), 
substituted ``section 1245 property (as defined in section 1245(a)(3))'' 
for ``section 38 property''.
    Subsec. (d)(5). Pub. L. 101-508, Sec. 11813(b)(11)(B), amended par. 
(5) generally. Prior to amendment, par. (5) read as follows: ``This 
section shall not apply to any section 179 property purchased by any 
person described in section 46(e)(3) unless the credit under section 38 
is allowable with respect to such person for such property (determined 
without regard to this section).''
    1988--Subsec. (b)(3). Pub. L. 100-647, Sec. 1002(b)(1), amended par. 
(3) generally. Prior to amendment, par. (3) read as follows:
    ``(A) In general.--The aggregate cost of section 179 property taken 
into account under subsection (a) for any taxable year shall not exceed 
the aggregate amount of taxable income of the taxpayer for such taxable 
year which is derived from the active conduct by the taxpayer of any 
trade or business during such taxable year.
    ``(B) Carryover of unused cost.--The amount of any cost which (but 
for subparagraph (A)) would have been allowed as a deduction under 
subsection (a) for any taxable year shall be carried to the succeeding 
taxable year and added to the amount allowable as a deduction under 
subsection (a) for such succeeding taxable year.
    ``(C) Computation of taxable income.--For purposes of this 
paragraph, taxable income derived from the conduct of a trade or 
business shall be computed without regard to the cost of any section 179 
property.''
    Subsec. (d)(1). Pub. L. 100-647, Sec. 1002(a)(19), substituted 
``tangible property (to which section 168 applies)'' for ``recovery 
property''.
    1986--Subsec. (b). Pub. L. 99-514, Sec. 202(a), in amending subsec. 
(b) generally, substituted ``Limitations'' for ``Dollar limitation'' in 
heading, in par. (1) substituted as heading ``Dollar limitation'' for 
``In general'' and in text ``shall not exceed $10,000'' for ``shall not 
exceed the following applicable amount:'' and a table specifying amounts 
for specific years, added pars. (2) to (4), and struck out former par. 
(2) which read as follows: ``In the case of a husband and wife filing 
separate returns for a taxable year, the applicable amount under 
paragraph (1) shall be equal to 50 percent of the amount otherwise 
determined under paragraph (1).''
    Subsec. (d)(1). Pub. L. 99-514, Sec. 202(b), inserted ``in the 
active conduct of''.
    Subsec. (d)(8). Pub. L. 99-514, Sec. 201(d)(3), substituted 
``Treatment of'' for ``Dollar limitation in case of'' in heading and 
amended text generally. Prior to amendment, text read as follows: ``In 
the case of a partnership, the dollar limitation contained in subsection 
(b)(1) shall apply with respect to the partnership and with respect to 
each partner. A similar rule shall apply in the case of an S corporation 
and its shareholders.''
    Subsec. (d)(10). Pub. L. 99-514, Sec. 202(c), struck out ``before 
the close of the second taxable year following the taxable year in which 
it is placed in service by the taxpayer'' after ``at any time''.
    1984--Subsec. (b)(1). Pub. L. 98-369 amended table by dropping items 
setting applicable amounts of $0 for 1981 and $5,000 for 1982, 
substituting an applicable amount of $5,000 for 1983, 1984, 1985, 1986, 
and 1987 for former table items which had set applicable amounts of 
$5,000 for 1983, $7,500 for 1984, $7,500 for 1985, and $10,000 for 1986 
or thereafter, and added items setting applicable amounts of $7,500 for 
1988 or 1989, and $10,000 for 1990 or thereafter.
    1983--Subsec. (d)(10). Pub. L. 97-448 added par. (10).
    1982--Subsec. (d)(8). Pub. L. 97-354 substituted ``partnerships and 
S corporations'' for ``partnerships'' in heading, and inserted ``A 
similar rule shall apply in the case of an S corporation and its 
shareholders.''
    1981--Pub. L. 97-34 amended section generally, changing its content 
from provisions that formerly made available an additional first-year 
depreciation allowance for small businesses to provisions allowing a 
taxpayer to elect to treat the cost of section 179 property as an 
expense which is not chargeable to capital account, with any cost so 
treated to be allowed as a deduction for the taxable year in which the 
section 179 property is placed in service.
    1976--Subsecs. (c)(1), (2), (d)(6)(B). Pub. L. 94-455, 
Sec. 1906(b)(13)(A), struck out ``or his delegate'' after ``Secretary''.
    Subsec. (d)(8), (9). Pub. L. 94-455, Sec. 213(a), added par. (8) and 
redesignated former par. (8) as par. (9).
    Subsec. (e). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ``or 
his delegate'' after ``Secretary''.
    1969--Subsec. (d). Pub. L. 91-172 substituted reference to component 
members of a controlled group for reference to members of an affiliated 
group in pars. (2)(B) and (b), and substituted definition of controlled 
group for definition of affiliated group in par. (7).
    1962--Subsec. (d)(5). Pub. L. 87-834, Sec. 13(c)(2)(A), substituted 
``section 167(h)'' for ``section 167(g)''.
    Subsec. (d)(8). Pub. L. 87-834, Sec. 13(c)(2)(B), substituted 
``section 167(g)'' for ``section 167(f)''.


                    Effective Date of 1996 Amendment

    Section 1111(b) of Pub. L. 104-188 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years beginning after December 31, 1996.''
    Amendment by section 1702(h)(10), (19) of Pub. L. 104-188 effective, 
except as otherwise expressly provided, as if included in the provision 
of the Revenue Reconciliation Act of 1990, Pub. L. 101-508, title XI, to 
which such amendment relates, see section 1702(i) of Pub. L. 104-188, 
set out as a note under section 38 of this title.


                    Effective Date of 1993 Amendment

    Section 13116(b) of Pub. L. 103-66 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to taxable 
years beginning after December 31, 1992.''


                    Effective Date of 1990 Amendment

    Amendment by Pub. L. 101-508 applicable to property placed in 
service after Dec. 31, 1990, but not applicable to any transition 
property (as defined in section 49(e) of this title), any property with 
respect to which qualified progress expenditures were previously taken 
into account under section 46(d) of this title, and any property 
described in section 46(b)(2)(C) of this title, as such sections were in 
effect on Nov. 4, 1990, see section 11813(c) of Pub. L. 101-508, set out 
as a note under section 29 of this title.


                    Effective Date of 1988 Amendment

    Amendment by Pub. L. 100-647 effective, except as otherwise 
provided, as if included in the provision of the Tax Reform Act of 1986, 
Pub. L. 99-514, to which such amendment relates, see section 1019(a) of 
Pub. L. 100-647, set out as a note under section 1 of this title.


                    Effective Date of 1986 Amendment

    Amendment by section 201(d)(3) of Pub. L. 99-514 applicable to 
property placed in service after Dec. 31, 1986, in taxable years ending 
after such date, with exceptions, see sections 203 and 204 of Pub. L. 
99-514, set out as a note under section 168 of this title.
    Amendment by section 201(d)(3) of Pub. L. 99-514 not applicable to 
any property placed in service before Jan. 1, 1994, if such property 
placed in service as part of specified rehabilitations, and not 
applicable to certain additional rehabilitations, see section 251(d)(2), 
(3) of Pub. L. 99-514, set out as a note under section 46 of this title.


                    Effective Date of 1984 Amendment

    Amendment by Pub. L. 98-369 applicable to taxable years ending after 
Dec. 31, 1983, see section 18(a) of Pub. L. 98-369, set out as a note 
under section 48 of this title.


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 97-448 effective, except as otherwise provided, 
as if it had been included in the provision of the Economic Recovery Tax 
Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 
109 of Pub. L. 97-448, set out as a note under section 1 of this title.


                    Effective Date of 1982 Amendment

    Amendment by Pub. L. 97-354 applicable to taxable years beginning 
after Dec. 31, 1982, see section 6(a) of Pub. L. 97-354, set out as an 
Effective Date note under section 1361 of this title.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-34 applicable to property placed in service 
after Dec. 31, 1980, in taxable years ending after that date, see 
section 209(a) of Pub. L. 97-34, set out as an Effective Date note under 
section 168 of this title.


                    Effective Date of 1976 Amendment

    Amendment by section 213(a) of Pub. L. 94-455 applicable in the case 
of partnership taxable years beginning after Dec. 31, 1975, see section 
213(f) of Pub. L. 94-455, set out as an Effective Date note under 
section 709 of this title.


                    Effective Date of 1969 Amendment

    Amendment by Pub. L. 91-172 applicable with respect to taxable years 
ending on or after Dec. 31, 1970, see section 401(h)(3) of Pub. L. 91-
172, set out as a note under section 1561 of this title.


                    Effective Date of 1962 Amendment

    Amendment by Pub. L. 87-834 applicable to taxable years beginning 
after Dec. 31, 1961, and ending after Oct. 16, 1962, see section 13(g) 
of Pub. L. 87-834, set out as an Effective Date note under section 1245 
of this title.


                             Effective Date

    Section 204(c) of Pub. L. 85-866 provided that: ``The amendments 
made by this section [enacting this section] shall apply with respect to 
taxable years ending after June 30, 1958.''


                            Savings Provision

    For provisions that nothing in amendment by Pub. L. 101-508 be 
construed to affect treatment of certain transactions occurring, 
property acquired, or items of income, loss, deduction, or credit taken 
into account prior to Nov. 5, 1990, for purposes of determining 
liability for tax for periods ending after Nov. 5, 1990, see section 
11821(b) of Pub. L. 101-508, set out as a note under section 29 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 30, 42, 179A, 263, 280F, 
1245, 1397A, 1397D, 1400B, 1400F, 1400J of this title.
